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Political economy of private firms in China

Author

Listed:
  • Guo, Di
  • Jiang, Kun
  • Kim, Byung-Yeon
  • Xu, Chenggang

Abstract

The sweeping change in political economy associated with the rapid growth of the private sector in China is rarely studied empirically in the economics literature. Using four cross-sectional surveys of private firms between 1995 and 2010, we examine the dynamics of rent creation from Party membership and other political connections when the regime changed from anti-capitalistic to pro-capitalistic during the period 2002–2004. We find that entrepreneurs with political connection enjoyed significantly more rents only after the constitutional amendments. This finding sheds lights on the nature of the political economy of today’s Chinese economy. Endogeneity/causality problems are addressed.

Suggested Citation

  • Guo, Di & Jiang, Kun & Kim, Byung-Yeon & Xu, Chenggang, 2014. "Political economy of private firms in China," Journal of Comparative Economics, Elsevier, vol. 42(2), pages 286-303.
    • Handle: RePEc:eee:jcecon:v:42:y:2014:i:2:p:286-303
    DOI: 10.1016/j.jce.2014.03.006
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    More about this item

    Keywords

    Party membership; China; Political connections; Private firms;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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